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newsletter - fourth quarter 2005Ventures West News 2005 was one of our most active years ever and marks 3 consecutive years of increased investment. Overall, Ventures West invested $53.6 million, in both new and follow-on financings. There were 6 new investments in VW8, 22 follow on investments across our 4 existing funds and 6 liquidity events. More details are found in this quarter's newsletter article below. New Companies Funded In the fourth quarter of 2005 Ventures West participated in one new financing and 6 follow-ons, investing a total of $16.6 million. The new portfolio company is Resonant Medical. Resonant Medical Inc. is a leader in 3D ultrasound image-guided adaptive radiotherapy products which are intended to make an important contribution to the treatment of cancer through radiotherapy in the area of treatment planning, verification and delivery. www.resonantmedical.com Awards, IPOs, Financings and Acquisitions
Articles and Opinions A Look Back at 2005 We entered 2005 hoping that the improvements in the general economy and venture capital industry seen in 2004 would be sustained. This appears to have happened as interest rates stayed low and the economy grew. The Canadian venture capital industry also had a good year with the amount invested totaling approximately $1.83 billion, just slightly above the amount invested in 2004. Follow-on investments continued to account for the majority of dollars invested ($1.35 billion vs. $474 million for new investments) reflecting the support the industry is providing to its existing portfolio companies, as IPOs and other sources of capital continue to be unavailable to early stage technology companies. The industry raised $2.2 billion of new capital in 2005, a 32% increase over the $1.7 billion raised in 2004 (a net inflow given the $1.83 billion invested), with private, institutionally supported fund managers accounting for $672 million of this (vs. $445 million in 2004 – a 51% increase).
Ventures West Highlights 2005 was a very busy year at Ventures West. Over the course of the year, we made six new investments as well as 22 follow-on investments, investing a total of over $53 million. The new portfolio companies are located in Montreal, Toronto and Seattle, and are in the software, fabless semiconductor, medical equipment, advanced materials and biotech sectors. New Investments in 2005
Based in Montreal, CarboPur designs and manufactures high-performance advanced activated carbon materials for filtration applications, such as water and air purification, and energy storage applications. CarboPur’s patent-protected process is cost competitive and environmentally friendly.
Resonant develops, manufactures and commercializes 3D ultrasound image-guided adaptive radiotherapy products. Resonant's technology allows clinicians to guide the administration of X-ray beams in the treatment of solid tumors.
2005 was also a busy year in the existing portfolio, with 22 follow on investments being completed. The biotech sector in particular saw a number of large financings. In May, Ventures West portfolio company Celator Pharmaceuticals raised US$40 million, one of the year's largest venture capital financings in the North American biotech industry. The round included new investors Domain Associates, Quaker BioVentures and TL Ventures. Celator is a biopharmaceutical company working to develop new and more effective therapies to treat cancer. Their CombiPlex technology platforms make it possible to identify and "lock in" the precise ratio of chemotherapy agents and make it possible to maintain those ratios in the body to treat cancer more effectively. In August, Vancouver-based OncoGenex Technologies Inc. raised US$12.8 million, in an oversubscribed Series B2 financing round. OncoGenex is a clinical-stage biotechnology company developing targeted therapeutics for the treatment of cancer. Their product OGX-011, which inhibits production of clusterin, a cellular stress protein that is associated with resistance to standard cancer therapies is currently in Phase 2 trials. Their product OGX-427 is expected to begin clinical development in 2006. A Busy Year in Exits We said in our Year in Review article last year that we thought 2005 would be seen as the year that M&A in the technology and communications sectors bounced back following the late-1990s boom and subsequent bust. 2005 was in fact a successful year in this respect as four of our portfolio companies were acquired. The year started off with the January closing of Siemens AG's acquisition of Chantry Networks, a developer of 802.11 wireless LAN infrastructure products, which was originally announced in December 2004. In May, Salmedix Inc, a Ventures West 7 portfolio company, announced it was being acquired by Cephalon Inc, a NASDAQ traded biopharmaceutical company, for US$160 million plus additional milestone based payments. The action continued in June, when INEA Corp., another Ventures West 7 portfolio company and one of Canada’s leading financial services software providers, announced it was being acquired by Cartesis Group, a Paris-based supplier of business performance management (BPM) software. In September, SAP AG acquired Triversity Inc. Triversity, a provider of point-of-sale (POS) software solutions to the retail sector, has been in the Ventures West 6 portfolio since 1997 and since that time has grown to be one of the leaders in the POS market. Also in September, Databeacon Inc., another Ventures West 6 portfolio company, was acquired by Cognos Inc., the world leader in Business Intelligence and performance planning software. IPOs We are beginning to see encouraging signs that the investment community has recovered from the shock of the bursting tech bubble in the early part of the decade and there are glimmers that markets have stabilized and IPOs are again a possibility for early stage technology companies.
On The Personnel Front As many of you may be aware, September saw Robin Louis, who had been the President of Ventures West since 1999, assume the role of Chairman of the firm and I took on the role of President. In addition to his duties as Chairman, Robin will focus his efforts on his current portfolio companies as well as on identifying new investment opportunities for Ventures West. Robin is a difficult act to follow. Under his leadership Ventures West raised Ventures West 7 and Ventures West 8, the two largest venture funds of their time in Canada. In addition, in his role as President of the Canadian Venture Capital and Private Equity Association he was a dynamic and effective leader of, and spokesman for, the venture capital industry in this country. We are very glad that even though his responsibilities have changed and his schedule has slowed down (a little) that he will still be available to us on a full time basis as his perspective, knowledge and insight are valued by all of us here at Ventures West. In March, Robin Axon and Pardeep Sangha were named Vice Presidents of the firm. Robin, based in Toronto, and Pardeep, based in Vancouver, both focus on IT and communications investments. These appointments reflect their increased level of responsibility at Ventures West and their contribution to the growth and success of the organization. The other major VW personnel event was Nancy Harrison’s decision to resign from the firm in order to spend more time with her family. Nancy joined Ventures West in 1993 and has been instrumental in establishing Ventures West as a leader in biotech and life sciences investing in Canada. Nancy helped build a strong life sciences team at Ventures West and Dr. Maha Katabi and Chris Laird will continue to build our practice and maintain our position as a leader in the sector. Going Forward We believe 2006 will be the year that both the venture capital and early stage technology industries in Canada return to pre-bubble levels of activity and stability. It is likely that M&A will continue at healthy levels as sectors continue to consolidate, and that IPOs will again be an option for early stage technology companies. We see there being exciting investment opportunities as the internet continues to evolve as a major hub of economic activity, with new initiatives such as IPTV and increasing interactivity via the web giving life to new technological innovations, products and businesses. We believe there are exciting investment opportunities available and are looking forward to another busy and productive year. |
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December 2005 - Polyfuel Inc. - PolyFuel Wins Frost & Sullivan 2005 Emerging Technology Innovation Award - 
October 2005 - QuIC Financial Technologies - QuIC, a new name and new look for Quadrus Financial Technologies - 
One data point that continues to be worrisome is the average amount invested per company in Canada vs. the U.S. In Canada, the average amount invested in a company is $3.1 million; in the U.S. the average is $10.5 million. These U.S. companies are the competitors that our portfolio companies will be coming up against in the market and having over three times the capitalization provides them significant competitive advantages. This is an issue that the Canadian industry must address in order to allow Canadian entrepreneurs and their companies the ability to succeed on both the continental as well as the global stage.
Founded in January 2004, Alder Biopharmaceuticals uniquely identifies, develops, and manufactures novel antibody therapeutics to alleviate human suffering in the autoimmune and inflammatory disease areas.
AudienceView develops fully integrated web-ticketing, Customer Relationship Management (CRM), and funds management software for the entertainment and sports industries. Customers include the Toronto Blue Jays, Churchill Downs Inc., Wynn Las Vegas, CanStage and Second City.
Fortiva is a leading provider of managed email archiving solutions for regulatory compliance, legal discovery and email storage management needs. Their solutions have robust search and discovery, supervision and enforcement features.
Fresco Microchip is a seed stage, fabless-semiconductor company developing a chip that will provide the functionality that is currently provided by tuners and de-modulators in television sets and other broadcast signal receiving devices, in a more cost effective and efficient way.
Ventures West had two portfolio companies go public in 2005. In June, Novadaq Technologies Inc., a Ventures West 8 portfolio company that develops and markets medical devices that facilitate improved diagnosis and treatment in a variety of medical disciplines, went public on the Toronto Stock Exchange (TSE: NDQ) raising $25.175 million. In July, Polyfuel Inc., a developer of membranes for fuel cells and a Ventures West 7 portfolio company, listed on the AIM exchange (LSE AIM: PYF) with an initial market capitalization of £22.7 million.